Registered Rep.: Why would a wirehouse rep want to leave his firm and join yours?
J. Andrew Kalbaugh: When wirehouse reps work with our firm, they expand the range of products they can offer clients. Our technology gives our representatives wirehouse-level support. Finally, our Business Development team's sole responsibility is to grow the profitability of our representatives' practices.
RR: Other than your own, of course, which other independent broker/dealers are you impressed with and why?
JK: LPL Financial. Management's investments in technology and in fee-based programs have paid enormous dividends. (Mutual Service Corporation is now owned by LPL, but operates under the MSC brand.)
RR: What is your least favorite compliance rule?
JK: At the moment, I think it is Rule 2821 (the new VA rule). While I understand the rationale for the regulation, I think it will create a number of operational challenges.
RR: Are your affiliated advisors fee-based or mostly commission/transaction advisors?
JK: It is mixed. About 27 percent of our revenue is fee-based. More than 70 percent is still from commission products.
RR: How many of your reps are dually registered? Is that number growing or not?
JK: Seventy-five percent.
RR: What was the most expensive aspect of running your independent broker/dealer firm during 2007?
JK: Technology. We have spent a great deal of time and money to connect LPL's desktop portal, BranchNet, to our clearing firm, Pershing.
RR: What are your recruiting goals through 2008 and beyond?
JK: Recruiting quality advisors is always a priority. We think the ability to offer multiple RIA options along with Pershing platforms that connect to the full functionality of the BranchNet system provides MSC with one of our best recruiting environments in our nearly 40-year history.
RR: What are your thoughts on upfront bonuses?
JK: Declined to answer.
RR: The ideal advisor is? (Three words or less.)
JK: Productive, self sufficient and compliant.
RR: What is the biggest challenge in 2008 for the independent channel and your firm?
JK: To continue to identify and adapt to changes in the financial industry, and to effectively support our advisors to manage those changes in their practice profitably.
RR: The best technology investment your firm has made?
JK: Next year, I would say BranchNet.
RR: Best advice you can give a wirehouse rep who is thinking about going independent?
JK: Align yourself with a firm that is both positioned to support your practice for the long haul and one that can support your unique needs. Make sure you spend time on the b/d's culture.
RR: What challenges will you face over the next five years?
JK: MSC will continue to keep a “hands-on approach” in supporting our advisors. We will continue investing in the technology that will help our advisors grow and manage their practices more efficiently. We will build out a scaleable service center and operations area that will make it possible for us to support and process our advisors business accurately and quickly even as our volume increases.
RR: If you could meet one business-related figure, dead or alive, who would it be and what would you ask?
JK: Henry Ford. How did you take your vision and make it a reality? Was it difficult to get investors to buy into your vision?
RR: In 10 years, your firm will be?
JK: One of the pre-eminent broker/dealers every advisor puts on their “short list” when they are considering changing firms.
RR: A book every financial advisor should read?
JK: Tested in the Trenches by Ron Carson. (See page 72.)
Mutual Service Corporation
250 Austrailian Avenue South, Suite 1800
West Palm Beach, FL 33401
Number of Back Office Employees: 40
Number of advisors: 1,065
Total Client Assets Under Management: $6.3 billion
Advisors' Average Length of Service (in industry): N/A
Total Revenue Year to Date: $247 million
Revenue from Commissions: $229 million
Revenue from Fees: $7.8 million
Average AUM per Rep: $6.3 million
Average Payout per Rep (percent): 89%
Average Production per Rep: $215,000
Number of Dually Registered Reps: 802